The German election

The German election is another milestone of governments moving to the right with the re-election of Obama the standout exception. But my interest is the economic policies that led to such a stunning outcome. Where is the textbook that will explain any of this to you?

During the campaign, Merkel said that insisting on reforms in euro countries that received aid was the only way to raise Europe’s competitiveness, citing the fall in German joblessness from a post-World War II high of 12.1 percent in 2005 following a labor-market overhaul. The German unemployment rate is now 6.8 percent compared to 12.1 in the 17-nation euro region. German 10-year bond yields are 1.94 percent, while comparable U.K. gilts yield 2.92 percent and U.S. debt 2.73 percent. . . .

For now, with wages rising and the budget deficit virtually eliminated, voters backed her handling of the domestic economy, and her push for austerity in the euro zone in exchange for aid.

Right now I have arrived at the macro section of my course and am teaching the standard aggregate demand-aggregate supply mantra of the 99%. It just strikes me as utterly incredible that this is still what we make every student of economics learn. Evidence based policy is not much in evidence it seems to me.

This entry was posted in Uncategorized. Bookmark the permalink.

40 Responses to The German election

  1. Rabz

    The German election is another milestone of governments moving to the right with the re-election of Obama the standout exception.

    What Steyn sarcastically refers to as – “the type of American exceptionalism we could do without”.

  2. David

    Angela Merkel. A competent and gutsy leader who got to her position without any list Enily’s or otherwise.

  3. Robert Blair

    Cultural determinism.

    A Merkel could never win in France, wouldn’t even get a run in Spain or Greece.

    Cultures change, alas. Inexorably left-ward, or so the muse of Clio seems to be saying …

  4. Paul CO

    The Germans make good stuff then lend people money to buy it. They’re on a roll; not only steadying the Euro-shakes but having financed their own expensive reunification.

  5. Cold-Hands

    The German Greens have slumped from 11% to 8%, having polled as high as 16%. Hopefully, the Greens are in full ebb both here and abroad.

  6. Walter Plinge

    Angela Merkel. A competent and gutsy leader who got to her position without any list Enily’s or otherwise.

    Except when it comes to power policy: renewables and nuclear. There she is incompetant and gutless. She’s makinga a pig’s breakfast of power and slowly sending Germany down the tubes. Germany is not self-sufficient in electricity. The Christine Milne of Germany.

  7. brc

    Can someone give me the rundown? I thought Merkel was essentially a euro Keynesian afflicted with renewables love. Are we saying here she is some sort of conservative figure? What useless government appendage has she abolished?

  8. Angela Merkel. A competent and gutsy leader who got to her position without any list Enily’s or otherwise.

    Yes, her past is a beacon of light and truth.

  9. Oh, and this from another friend of Merkel’s. perhaps she’s not the nice little old lady she appears to be.

  10. Except when it comes to power policy: renewables and nuclear. There she is incompetant and gutless.

    Or maybe not.

  11. egg_

    Except when it comes to power policy: renewables and nuclear. There she is incompetant and gutless. She’s makinga a pig’s breakfast of power and slowly sending Germany down the tubes. Germany is not self-sufficient in electricity. The Christine Milne of Germany.

    IIRC the Euros can’t compete with the US and Japan for energy costs and are losing industry offshore which won’t help Germany(‘s employment), either.

  12. Rafe

    All you can say for AM is that she might be the best of a bad lot. The green vote went down a long way but so did the classcal liberals who look like missing the 5% cut to be represented. They were something like 9%.

  13. Cold-Hands

    Can’t help feeling sorry for Herr Merkel. Why she retains his surname after the divorce is weird- she either believes in taking her husband’s surname, in which case why not adopt her current husband’s name? or, she is a liberated wymminses, in which case she should use her maiden name.

  14. dover_beach

    or, she is a liberated wymminses, in which case she should use her maiden name.

    You mean maintain the surname of her father’s?

  15. Bruce

    Two new coal fired power stations were commissioned last year in Germany and six more are due on line this year. Another 6 are in the pipeline. Some of the new ones even use ultra-evil brown coal. Merkel has been very quietly fostering this, justified by the retreat from nuclear power.

    All which suggests she has a rather schizophrenic approach to Energiewende, which I suspect will be no longer talked about, as though it never existed.

  16. Rebel with cause

    she should use her maiden name

    Her maiden name is Kasner. Her father was a socialist church minister. He was against the reunification of Germany becuase he believed the socialist state could succeed. I think he might have been one of the few (only?) people to have moved from West to East Germany in the days before the wall went up, taking his family with him.

  17. Bill

    Cutting unemployment from 12.1% to 6.8% since 2005, is utterly remarkable in the current European context. Are those figures actually valid? And without major deficit spending.

    Energy policy is a real shocker though. I’d expect some changes here, and not changes that would thrill the ex-Climate Change Authority.

  18. Oh come on

    Problem is that in many countries conservatives have only been electable because they are nominally conservative. If these politicians ever campaigned on a platform of making the painful but necessary Thatcheresque reforms to the massive and unsustainable progressive welfare edifice, they wouldn’t stand a chance. The fate of Sarkozy is instructive. To give him his due, at least he had a crack, but his reformist zeal petered out after a couple of years when he realised going forward with what needed to be done would probably make him a one termer, so he reinvented himself as a Compassionate Conservative and lost anyway.

    Most of the Euro right governments are ineffectual Compassionate Conservatives who have absolutely no intention of challenging the Progressive orthodoxy that will ultimately ruin their countries.

  19. Cold-Hands

    You mean maintain the surname of her father’s?

    Maintaining the surname she was given when she was born- either maternal or paternal. Operating under her divorced husband’s surname is just perverse.

  20. Myrrdin Seren

    I am a regular reader of Ambrose Evans-Pritchard in the UK Tele

    He has been a bit sceptical of the applicability of the German dynamic to the weaker and now-struggling members of the Euro-bloc.

    eg

    I think someone made the point a while back that to stabilise the disparate economies of the Euro-bloc, the Germans would have to provide something like 9% of annual GDP in transfers.

    Which they won’t do – because good Lutherans that they are, they think the Club Med just has to dig its way out of lack of its problems.

    That whole pile of money they are owed by the debtor states under the Target2 European interbank system may be a long, lonnng time in getting settled.

    Frau Merkel may soon have to break some home truths to her good burghers.

  21. Fred Lenin

    It is good to see a Real Conservative government in Europe, Vladimir Putin and Dmitri Medvedev aredoing a Great Job in Russia.Taking the green Fascist Pirates off the boet they tried to steal. ,and Pacifying Chechnya as they have done,is an example to other weak so called right wingers,Russia has also got kevin obama out of the poo.by talking him out of being al quaidas air force. There is no bull with Russians.avery tough down to earth people.

  22. Oh come on

    I haven’t been hanging around here much recently. Is Fred a troll or just extremely simple?

  23. james

    Germans of all stripes are just weird.

    Like the Japs they seem to be one of the few cultural groups on earth able to live within a big government society and remain productive.

    IIRC AM has done some fiddling on IR in recent years, that seems to have been enough to kick start the Germans a touch, I don’t think the experiment could be successfully replicated in many other lands however.

  24. Jim Rose

    the Left party did well in the german election. barely reconstructed communists the lot of them. our local far left parties still lose their deposits

  25. Rebel with cause

    james – the Scandinavians seem to do alright with a bug state too. I think you basically have to have a culture with a very high work ethic that frowns on moochers and low inward permanent migration to stop upsetting this.

  26. Rebel with cause

    Opps – big state I mean!

  27. james

    the Scandinavians seem to do alright with a big state too.

    Hence why I said:

    Germans of all stripes are just weird.

    I include the Swiss as well.

  28. Rebel with cause

    Touché. Other important factors are that they still respect private property and will let badly run firms go belly-up. So the Swedes let Saab go whereas Obama bailed out US auto firms etc.

  29. Pyrmonter

    1 – much of the labour and social welfare reform (called Harz IV)was undertaken, controversially, under the control of the former SPD Chancellor, Gerhard Schroeder, who governed in an SPD/Green coalition.

    2 – both the FDP, the traditional but europhile liberals, and the Alternative fur Deutschland, a mildly eurosceptic liberal-ish party have fallen short of the 5% threshold. Between them they commanded around 9.6% of the vote. The CDU, while “right of centre” has a long tradition of government patronage and is not much more market-friendly than the SPD.

  30. Andrew

    Merkel = leader, Gillard = victim. Say no more.

  31. Jannie

    I have many German friends. I was last there in Stuttgart last year. They are the sort of greenies who worry about their local river and their air quality, not global warming. They all hate nuclear power, and have bad dreams about Chernobyl and the winds from the east. They worry about the French nuclear power they buy. They are quite happy to burn coal for power, so long as the soot is controlled and captured.

    They will cheerfully pay more for coal power than nuclear power. Nuclear is a proven threat to them, coal they can control.

    They are pretty relaxed about Angela, but are unhappy that they have to keep bailing out the mendicant euro states. Evn though the Greeks buy their Mercs with the money they lend them. They work hard, and eat gluey spetzla, and fatty veal. Good beer but.

  32. Tel

    The Germans make good stuff then lend people money to buy it. They’re on a roll; not only steadying the Euro-shakes but having financed their own expensive reunification.

    They are on a roll right up to the day when they think some of that loaned money will be paid back… and that’s where it stops, because none of it ever will be paid back.

  33. Tel

    All you can say for AM is that she might be the best of a bad lot. The green vote went down a long way but so did the classcal liberals who look like missing the 5% cut to be represented. They were something like 9%.

    My theory is that they ended up making the mistake of splitting their vote. If you add in AfD you get back to a bit over 9% so basically some voters moved across to an anti-euro position but because of the 5% cutoff it ended up with both parties being losers. Hopefully they can come to some agreement next time around.

  34. Tel

    That whole pile of money they are owed by the debtor states under the Target2 European interbank system may be a long, lonnng time in getting settled.

    Frau Merkel may soon have to break some home truths to her good burghers.

    The Germans I’ve met have always been well educated and quick to catch on, I have trouble believing that most of them don’t know the deal already. The fact that they seem OK with it I suppose means they are willing to tolerate transfers in the name of not making trouble, but over time I think the loans will gradually dry up, which is the best thing that can happen for Greece, Spain, etc.

  35. steiner

    So, your new theory is imposition of austerity on your neighbour is the path to salvation? And perhaps it works! Germany ran huge deficits while telling Southern Europe that austerity was essential. Never mind the huge unemployment levels and millions thrown out of work – likely never to get a job again.
    The real story is in export prices. By keeping the Euro together, Germany is continuing to take advantage of hugely depressed exchange rates. Should southern Europe exit the Euro, as they should to get some semblance of competitiveness back into their economies, German competitiveness would collapse.
    Germany is trading on the misery of southern Europe to keep it’s own manufacturing economy alive.
    Hardly an example of morality, or an example that any other country can follow.

  36. topological

    I live in German and this was a bad election for the right, verging on a catastrophe, despite the way it is being spun. It was an election were a clear majority of voters ( 53% plus) voted for right wing parties, yet the makeup of the Bundestag actually has a slight left wing majority in terms of seats. Unfortunately, the two right wing parties FDP and AfD ended up with 4.8% and 4.9% of the vote respectively, painfully close to to 5% threshold needed to gain representation in parliament. As a result, about 7 million Germans or 10% of voters will not have their vote counted at all. The practical effect of all this is that Merkel will be forced to form a coalition with a left wing party (probably the absolutely awful social democrats). The CDU was already too far left when they were in coalition with FDP (they were even entertaining rent controls!), so I have no hope whatsoever that a CDU/ SPD coalition will effectively stand up against the other Euro nations or achieve any useful economic reforms at all. Despite her reputation abroad, Merkel is actually a weak, soft leader with a penchant for giving in to the left as soon as they make any noise whatsoever (e.g. google her backdown on nuclear energy).

  37. Popular Front

    So, your new theory is imposition of austerity on your neighbour is the path to salvation?

    TROLL WARNING! This knowitall has been infesting Bolt’s blog for ages. It got all huffy by being completely wrong on just about everything and getting flamed for it, so it had a monumental sook and departed saying it was never coming back. Well, you know the story, it missed its’ daily online fisting and came back prior to the election just in time to see its’ beloved ALP rabble shredded. So beware Cats, this troll is a deluded smartarse of the first order.

    p.s. steiner you boxhead, the moderation here is nowhere near as tough as it is on News Ltd sites. Get ready to have your arse handed to you, thinly sliced.

Comments are closed.